After citizens have spent a lifetime of paying income tax, capital gains tax, VAT or transfer duty, for the state to lay claim to their accumulated wealth when they die is greedy, immoral and socialist.
However, it is clear from his answers to questions from News24 on 11 June, University of Cape Town constitutional law expert Pierre de Vos thinks differently.
His responses, though, are contradictory and largely incomprehensible. On his blog, Constitutionally Speaking, De Vos said inheritance was a method by which white South Africa was able to retain the wealth it had accumulated over generations of colonial and apartheid rule.
On his motivation for introducing an inheritance tax, De Vos said: ‘For me, the important thing is that people should not unduly benefit because their parents have money.’ He excludes orphaned children and spouses. He says he’s not an expert, but it is the concept that he supports.
De Vos says that, globally, one should mitigate the effects of ‘unbridled capitalism’ in this way. De Vos provides no evidence of what ‘unbridled’ capitalism he is referring to, and why inheritance tax would mitigate the effects he doesn’t spell out.
In a classically liberal, free market economy as proposed by the IRR the individual and the family determine how an inheritance, if any exists, should be distributed.
An inheritance tax, currently at 20%, is actually a truly pernicious tax. It is a form of double-taxation on income, savings and investments upon which taxes have already been paid.
De Vos also expresses the unattractive tendency to make assumptions about the circumstances of the inheritance and the inheritors. He assumes that whatever comprises an inheritance is worthy of the penalty of tax as ‘reparations’ for apartheid without knowing anything about the circumstances of the testator’s capital gains. The racist assumption he makes is that any white person who has capital to bequeath got it unlawfully or exploitatively.
A ‘white tax’?
De Vos makes it clear that it’s a ‘white’ tax. So he presumably does not intend it to affect the black rich or the black middle class. Since much of the money that will be inherited was earned after 1994, is there a sunset clause for this tax on white money or is it permanent guilt-by-association? He doesn’t say.
As to where the money would go, De Vos refers to left-wing French economist Thomas Piketty who said that money should finance a kind of inheritance for everybody, but when they are young, say 25. De Vos doesn’t understand that, given the size of the white population, the first amount wouldn’t last and the subsequent wealth earned would end up being invested overseas.
De Vos believes that having access to capital is one of the most important indicators of success in life. It may be an indicator but just because you are white doesn’t mean it’s easy to access capital. De Vos clearly likes the idea of punishing people because they are white, for looking after their property wisely, saving and investing prudently.
A fundamental way to provide capital to people in this country is to grant black people title to the land they live on. Land as capital is a crucial indicator of the potential growth of wealth. The ANC intends to continue to own ‘black’ land and will expropriate ‘white’ land without compensation, so they can’t be accused of discrimination. On being asked if an inheritance tax would not infringe on the right to property in the Constitution, he suggests it would be easier to introduce the tax because there’s already a 20% inheritance tax on all inheritance over a certain amount in South Africa.
Law of succession
He does concede that to completely abolish inheritance rights, and for the state just to take your property is probably going to be difficult to justify in terms of our Constitution. It would require a complete overhaul of the current law of succession where the assumption is that you have absolute power to decide what happens to your property after you die. What, we would ask, is wrong with the individual deciding what happens to his or her property?
De Vos does think that there is a problem with the political will to implement such a scheme, because ‘those of us who have money tend to protect our own interests’ and these are not only ‘white people’.
Inheritance tax is always extremely unpopular, says De Vos, ‘even with people who will never have to pay any tax in terms of this system, because people always think, wrongly, that they’re going to die with much more money than they actually do’. So what?
The implementation would be problematic because those in government are not likely to be personally in favour of De Vos’s ideas.
De Vos then chickens out when asked if it could be argued that this is a different way of taking property. He says ‘I didn’t want to go there. It is one possible way of addressing almost the primal wound caused in South Africa by apartheid. It could be an alternative …. And, I don’t think it’s that revolutionary. It’s an incremental change. It’s conceptually revolutionary maybe in the sense that people believe this concept is completely normal and natural. The reason why I made the argument is to say, “these things, we just made them up”.’
Form of expropriation
Other than the fact that his response is garbled and nonsensical, it would certainly be a form of expropriation without compensation (EWC). EWC is not confined to land; it refers to ‘property’ which is much more than land.
The moral and ethical bind that De Vos gets himself into reflects a statism that we oppose. It’s not the state’s business what we as individuals do with our property after we have paid income tax, capital gains tax, VAT or transfer duty all through our lives. This is greedy, immoral and socialist.
Anyway, it’s academic (pun intended); if socialism is implemented by the ANC, inheritances would fall away.
Apparently 70% of families lose their wealth in the 2nd generation and 90% in the 3rd. Inherited wealth gets spent in the economy. As IRR CEO Frans Cronjé suggests, what about scrapping inheritance tax completely and thereby attracting investment?
Moreover, as Roman Cabanac on his Morning Shot podcast pointed out, the Claude Leon Foundation Chair in Constitutional Governance at the UCT, occupied by De Vos, exists because of a bequest from Claude Leon. The salaries of professors at UCT are R1,3 million per annum.
What’s more, has De Vos forgotten that the very existence of UCT is the result of a bequest by the much-loathed Cecil John Rhodes? How does that square with De Vos’s cognitive dissonance?
[Picture: Annie Spratt]
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